Coffee Market Special Report
Coffee Market Special Report 5/11/21
Fidalgo Coffee Roasters is experiencing pandemic related disruptions in supply because there is so much coffee stuck in Central America, waiting for shipping containers. This is a global problem affecting roasters large and small.
Compounding the shortage of shipping containers is a larger problem of congestion at sea ports.
Coffee travels by water, much of it through the Panama Canal, stopping at ports along the west coast. Los Angeles, being the largest and most backed up, is causing a domino effect of delays for the western U.S. to receive its goods. Folks think this will work itself out in the months ahead.
These delays have caused roasters to buy up “spot coffee” and created an environment similar to the rush on toilet paper in early 2020.
“Spot coffee” is warehoused by importers and available for purchase. It is not under contract.
“Booked coffee” is coffee purchased ahead of time by the roaster and under contract.
Think of the difference like; buying apples at the grocery store vs contracting with an apple farm to buy some or all of their crop.
Fidalgo Coffee buys about 90% of it’s coffee on contract. Our company is able to do this because of predictable sales volumes and frugal financial position.
At time of writing this, most spot coffee in the U.S. has been purchased by roasters —at higher prices than booked contracts. It will take time for those prices to work their way through the market or if things get back to normal with shipping that would give stability.
That volatility is lifting the general commodities futures price of green coffee. Add the shipping problem and we have a double whammy that should rally prices further. I could be wrong—I’m a roaster not a futures guy.
Here’s an article about this news when it started showing up in business headlines: